Car tax laws are changing in little over a month but with more than two thirds of drivers unaware of the new rules, millions could be risking fines of up to £1,000.

The paper tax disc is being scrapped after 93 years on 1 October, although tax will still need to be paid, and it will no longer be transferred when buying a second-hand vehicle.

A poll of more than 1,000 drivers found that 40 per cent were completely unaware of the impending changes and of those who were, half were unsure when they were coming in and many were not planning to find out more.

Research by a financial advice and comparison website found that one in three drivers claim they struggle to pay for their vehicle tax and many resort to overdrafts, borrowing from family friends or payday loans.

Anyone buying a second hand car will have to pay more for vehicle tax after the DVLA abolishes transfers.

Sellers who notify the authority will automatically get a full refund for the time left on the disc but buyers will have to pay for new tax - £175 a year on average.

People selling their car are expected to tell the DVLA straight away of the change of ownership or face fines of up to £1,000.

Among the more welcome changes is the ability to pay via direct debit instead of the year or six-month options currently available.

But drivers selecting monthly payments will pay 5 per cent extra each year on top of the average annual cost of tax and the millions of people who pay with a credit card will be hit with a £2.50 surcharge.

The DVLA will no longer allow tax to be transferred to new owners of second-hand cars
Hannah Maundrell, the editor of money.co.uk, said direct debits would help people who genuinely forget to renew their tax and end up being stung with a hefty fine.

“I suspect the new system may experience some teething problems so drivers really need to make sure they're on top of their game,” she added.

“Just because you don't have to display a tax disc doesn't mean you can get away with not paying it, if anything you're more likely to be caught now than before.”

Announcing the changes after last year’s Autumn Statement, the Department for Transport said the DVLA has a digital record of payments and a paper tax disc is no longer necessary as proof.